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Beyond Sarbanes-Oxley

Three best practices to adopt in your organization.

BY NEIL S. LEBOVITS

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EXECUTIVE
SUMMARY

Four years after the passage
of the Sarbanes-Oxley Act, this legislation
has transformed business and provided a platform for
increased dialogue about ethics (or in some cases, a
lack thereof) within American companies.

To foster a culture of ethics
that is based on action rather than
discussion, companies can take advantage of the
institutional knowledge that their accounting and
finance teams have gained in complying with SOX
regulations for the last several years.

One key ethical best practice
that can be easily transferred throughout
an organization is cultivating ethical role models.
Key influencers who demonstrate strong ethical
behavior should be given appropriate recognition
whenever possible, involved in projects in which
they can have a positive influence and rewarded for
their efforts.

Ethical business decision
making, another best practice, starts at
the top with leadership that motivates others to
emulate their behavior. Leaders must speak openly
and frequently about their views on and the value of
ethical behavior and, more important, behave
accordingly themselves.

Another positive practice
is to encourage employees to question
decisions they believe have dubious merits. It’s
also important to provide ethics hotlines and
anonymous feedback mechanisms.

Neil S. Lebovits, CPA, is president and chief operating officer of
the staffing service Ajilon Finance, a unit of
Adecco SA. His e-mail address is neil.lebovits@ajilon.com .

n 2006 we mark the fourth
anniversary of passage of the Sarbanes-Oxley Act. More than
any other piece of legislation affecting business in recent
history, Sarbanes-Oxley has transformed the way companies and
accounting and financial professionals operate. It has given
us a platform for increased dialogue about ethics (or in some
cases, a lack of them) within American companies.

Given this renewed emphasis on ethical behavior, the time
is right for organizations to move beyond regulatory
compliance and solidify a culture of ethics that makes doing
the right thing standard operating procedure. If we are going
to continue restoring consumer confidence in business, it is
imperative we promote the kinds of cultural changes that
ensure ethics permeate our companies from the top down.

Nearly a third of respondents in
a nationwide survey say their coworkers condone
“questionable” ethics practices by showing respect
for those who achieve success using them.

Source: The Ethics Resource Center’s 2003
National Business Ethics Survey.

To foster a culture of
ethics that is based on action rather than discussion,
companies can begin by taking advantage of the institutional
knowledge their accounting and finance teams have gained in
complying with Sarbanes-Oxley regulations for the last several
years. Because this group is on the front lines of
Sarbanes-Oxley compliance, these teams can generate best
practices to be implemented throughout the organization and be
recognized for serving as a model of excellence.

As
another part of this effort, there are three key ethical best
practices that can easily be transferred throughout an
organization: cultivating ethical role models, demonstrating
ethical business decision making and encouraging pushback.

CULTIVATE ETHICAL ROLE MODELS Every organization contains informal influencers—people
who tend to know what their colleagues are thinking and
feeling and who also help shape others’ attitudes by
expressing their own opinions through their actions.

The first step in developing role models in every part of
an organization is to identify key influencers who demonstrate
strong ethical behavior in their everyday work. Clearly, the
accounting and finance areas, with their deep understanding of
the issue, are a good place to start. Companies should give
these influencers appropriate recognition whenever possible,
involve them in projects in which they can have a positive
impact and reward them for their efforts. By doing so, an
organization can cultivate ethical conduct and show employees
that they too can be rewarded for practicing ethical behavior.

DEMONSTRATE ETHICAL BUSINESS DECISION MAKING Ethical behavior starts at the top, with leadership that
motivates others to emulate their behavior. When it comes to
ensuring ethical business decision making, nothing is more
important than the actions of an organization’s leadership.
Employees listen and watch management intently for cues on how
to model their behavior. Leaders must speak openly and
frequently about their views on and the value of ethical
behavior and, more important, behave accordingly themselves.

When appropriate, leaders should share examples of
business decisions that tested their ethical principles and
how they came to make the right decision. This type of candid
dialogue gives employees a glimpse into how leaders think and
act on behalf of the organization. The tougher the choice to
be made, the more influential this type of conversation can
be. It also provides employees with a point of reference when
they are faced with tough decisions related to their work
activities, helping to guide them in the right direction.

The leadership’s ethical behavior also can inspire greater
pride and satisfaction among workers. Those who work for
trustworthy management teams often have a greater respect for
their organization and are motivated to contribute more.

ENCOURAGE PUSHBACK This can be a challenging situation for managers, but to
foster an ethical culture, employees must feel as if they have
room to question decisions they believe have dubious merits.
This is not about letting employees steamroll managers but,
rather, about encouraging them to voice their opinions in a
professional way when they disagree with the actions or
decisions of their peers and even their bosses.

Some
companies have formal processes for this type of
communication, such as employee ethics hotlines or anonymous
feedback e-mails, but it can be handled informally as well.
The first step is to discuss the issue with managers. Do they
encourage feedback? How do they react when employees raise
questions? What is acceptable in terms of employee pushback?
What are some effective and ineffective ways employees have
pushed back on management opinions or decisions in the past?

As part of this discussion, encourage managers to ask
for feedback from employees when opportunities arise, so that
challenges need not occur down the line. Managers should
communicate their “pushback guidelines” to their direct
reports, letting them know that questions are welcome and how
and when they might best be raised. This reassures employees
that they can have this type of dialogue with their managers
and makes it possible for them to handle situations
effectively.

Practical Tips

Accounting and finance teams
are on the front lines in implementing the
Sarbanes-Oxley Act. Companies should look to
this group for advice on or examples of
ethical best practices to be implemented
throughout the organization.

Find the people with strong
ethical values who are in touch with
colleagues’ attitudes and in a position to
influence them. They can be recognized and
serve as role models.

When leaders speak frankly
about business decisions that tested their
ethical principles, it sets a standard for
employees and provides insights into
handling tough situations.

Employees should be
encouraged to speak up about questionable
decisions or actions and be given
guidelines on how to open this dialogue.

TAKING ACTION The ongoing conversation about ethics in business has
become so widespread it has even spawned new industries, such
as ethics consulting and research. The task now is to
translate words into actions that permeate the fabric of
corporate American culture until ethical behavior becomes
standard operating procedure at every level. Only then will we
be able to regain consumer and worker confidence in business.

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